WAGES Act of 2026

The WAGES Act of 2026 creates a tax credit for employers who hire apprentices through registered apprenticeship programs and also expands tax treatment for apprenticeship awards. The bill allows eligible employers to claim a credit against certain payroll taxes for 50% of qualified wages (up to $5,000 per apprentice per quarter) and registered apprenticeship program expenses (up to the greater of $5,000 or the lesser of $2,500 per apprentice or $50,000 per quarter). The credit is refundable if it exceeds the employer's tax liability. It also treats certain apprenticeship awards as employee achievement awards, increasing the tax-free limit to $1,500 for non-qualified plan awards and $5,000 for qualified plan awards when given to apprentices.

Sec. 3, Apprenticeship credit: This section adds a new section 3135 to the Internal Revenue Code. It provides a credit equal to 50% of qualified wages (capped at $5,000 per apprentice per quarter) and registered apprenticeship program expenses (capped at the greater of $5,000 or the lesser of $2,500 per apprentice or $50,000 per quarter). The credit is against applicable employment taxes (the employer portion of Social Security and Railroad Retirement taxes) and is refundable if it exceeds those taxes. Eligible employers must maintain a registered apprenticeship program or have a written agreement with a program sponsor, and employ a qualified apprentice. Qualified wages are wages paid to an apprentice while in the program, but only for the first two years. Registered apprenticeship program expenses include related instruction, on-the-job learning, mentor wages (capped at $10,000 per mentor per quarter), and other program costs. The credit does not apply to federal, state, or local governments (except certain colleges, universities, and medical entities). It also coordinates with other federal payments and allows employers to elect out. The Secretary of the Treasury must issue guidance, especially for third-party payors, and waive deposit penalties for reasonable anticipation of the credit.

Sec. 4, Tax treatment of apprenticeship awards: This section amends section 274(j) of the Internal Revenue Code to treat awards given to apprentices in connection with their registered apprenticeship program as employee achievement awards. Such awards are excluded from the employee's income if they meet conditions, but not if received during the first 90 days of the program. The tax-free limit for these awards is increased to $1,500 for non-qualified plan awards and $5,000 for qualified plan awards. These changes apply to awards transferred after the date of enactment.